Real Estate offers exposure to tangible assets with bond-like safety, and the potential for equity-like upside
Many investors have gravitated to both residential and commercial real estate in an era where interest rates are low and bonds offer yields that can fail to keep pace with inflation.
Common types of Real Estate investment strategies
Core
Core-Plus
Value-Add
Opportunity
Distressed Debt/Mezzanine
Real Estate investments have the potential to provide a steady income stream and build wealth over time
Funds that invest in Real Estate may consider investing in debt and equity securities in residential and commercial properties for both capital appreciation and income generation objectives.
They may also raise capital by borrowing, which can be particularly attractive in today’s low interest rate environment.
Investments in Real Estate have been steadily growing, with total assets under management rising from $300 billion in 2004 to $1.5 trillion in 2020, according to PwC.
The risks and rewards of Real Estate investments
Real Estate as an asset class is slightly different from other alternatives – being a hard asset, location and local economies can affect valuation to a greater degree than in traditional equity markets. Additionally, Real Estate is a cyclical industry that can be prone to booms and busts.
Risks
For Real Estate investors, timing can be everything as the industry is cyclical and there are often lengthy lockup periods which can affect liquidity. The use of leverage can be a double-edged sword.
Rewards
Besides the potential for enhanced returns in both debt and equity investments, real estate can stave off inflationary pressures and also allow diversification to protect investors’ portfolios against swings in equity markets.
Stay ahead of the curve
Real estate investments allow diversification into hard assets and can provide steady income along with capital growth.
Finding alternatives with PitchBoard
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